LONDON, Feb 23 (Reuters) - The extra money investors demand for the risk of holding French rather than German debt shrank from multi-year highs on Thursday as a centrist pact in France’s presidential election race eased market concerns about far-rightist Marine Le Pen gaining ground.

Francois Bayrou, an influential French centrist politician, on Wednesday decided not to stand in the election race and struck an alliance with presidential candidate Emmanuel Macron in a move that is seen boosting the latter’s chances in the tightly contested election.

Markets are nervous about Le Pen’s anti-euro stance and polls this week showing her narrowing the gap with centrist contenders has rattled investors wary after a populist backlash in votes in Britain and the United States last year.

Voting in France’s presidential election takes place in two rounds, scheduled for April and May, and the National Front’s Le Pen is widely tipped to go through to the second-round runoff but then lose.

Bayrou’s decision to back Macron has bought some relief to battered French bond markets.

The gap between French and German 10-year bond yields, a gauge of how investors view relative risks, narrowed to around 73 basis points. The spread widened to about 84 bps earlier this week -- the widest level since late 2012.

“Yesterday’s developments in France were positive for French bonds and broader risk appetite,” said Orlando Green, European fixed income strategist at Credit Agricole in London.